The latest episode in the IRS’s continued efforts to ferret out criminal tax evaders with undeclared foreign bank accounts has resulted in a $104 million dollar whistleblower payout for Bradley Birkenfeld. Birkenfeld is a former UBS AG banker who admitted to promoting tax evasion and helping clients move assets out of the United States. He began cooperating with U.S. authorities in 2007 and provided details about the banks complicity that eventually led UBS to disclose 4,000 account holders in 2009 and pay $780 million to resolve the criminal case. Mr. Birkenfeld consequently pled guilty to one felony count of conspiracy to defraud the U.S. and received a 40-month sentence that he is currently serving out in New Hampshire under home confinement after 30 months in Schuylkill County Federal Correctional Institution in Pennsylvania.
According to this article in the Wall Street Journal, “since , more than 33,000 U.S. taxpayers have confessed to holding undeclared overseas accounts and paid more than $5 billion in taxes and penalties.” Interestingly, according to a 2006 law, the IRS can pay whistleblowers’ awards of up to 30% of the collected proceeds. Moreover, provisions in the law do not preclude paying the money to convicted felons so long as they did not plan or initiate the evasion. Therefore, Birkenfeld will be able to keep his reward despite the actions that ultimately led to his conviction. The 104 million is 26% of the 400 million in tax paid by UBS to the IRS as a result of the 2009 settlement.
Mr. Zerbe, attorney for Birkenfeld, said, “[although] Mr. Birkenfeld provided information that ultimately led to $5 billion in revenue collected by the U.S., not all of that is eligible for whistleblower awards.” Nonetheless, he also stated that his client has other related whistleblower claims outstanding.
Lawmakers are convinced this is the only way to encourage insiders to take the risk of reporting tax cheats. Experts say the payout to Birkenfeld is the largest to date. However, this is yet another example that the IRS will continue to make a serious effort at uncovering those hiding assets abroad. Through all of this Switzerland, once a stronghold for banking secrecy has seen a 25% fall in private banking fees because it is no longer an attractive destination for foreign clients.